Con man Moses Pray meets nine-year-old Addie Loggins at Addie's mother's graveside service, where the neighbors suspect he is Addie's father. He denies this, but agrees to deliver the orphaned Addie to her aunt's home in St. Joseph, Missouri.

At a local grain mill, Moses convinces the brother of the man who accidentally killed Addie's mother to give him two hundred dollars for the newly orphaned Addie. Addie overhears this conversation and, after Moses spends nearly half the money fixing his used Model A convertible, later demands the money, whereupon Moses agrees to travel with Addie until he has raised two hundred dollars to give to her. Thereafter Moses visits recently widowed women, pretending to have recently sold an expensive, personalized Bible to the deceased husband, and the widows pay him for the bibles inscribed with their names. Addie joins the scam, pretending she is his daughter, and exhibits a talent for confidence tricks, cheating a cotton candy vendor out of a large sum of money. As time passes, Moses and Addie become a formidable team.

One night, Addie and "Moze" (as Addie addresses him) stop at a local carnival, where Moze becomes enthralled with an "exotic dancer" named Miss Trixie Delight, and leaves Addie at a photo booth to have her photograph taken alone (of herself sitting on a crescent moon, to suggest the film's title). Much to Addie's chagrin, Moze invites "Miss Trixie"—and her downtrodden African American maid Imogene to join him and Addie. Addie soon becomes friends with Imogene and becomes jealous of Trixie. When Addie subsequently discovers that Moze has spent their money on a brand-new car to impress Miss Trixie, she and Imogene devise a plan. They convince a clerk at the hotel the group are staying at to pay a visit to Trixie, and Addie sends Moze up to Trixie's room where he discovers the clerk and Trixie having sex, whereupon Moze leaves Miss Trixie and Imogene behind, while Addie leaves Imogene enough money to pay for her own passage home.

At a hotel in Kansas Moze finds a bootlegger's store of whiskey, steals some of it, and sells it back to the bootlegger. Unfortunately the bootlegger's brother is the sheriff, who quickly arrests Moze and Addie. Addie hides their money, steals back the key to their car, and the pair escape. To elude pursuit, they trade their new car for a decrepit Model T farm truck after Moze beats a hillbilly in a "wrasslin' match". The sheriff finds them in Missouri and, unable to arrest Moze, he and his cohorts beat and rob him. Humiliated, Moze drops Addie at her aunt's house in St Joseph but Addie, disappointed, rejoins him on the road. When he refuses her company she reminds him that he still owes her two hundred dollars and reveals that his truck has rolled away without him. They catch the truck, whereupon they leave together.

The film project was originally associated with John Huston and was to star Paul Newman and his daughter, Nell Potts. However, when Huston left the project, the Newmans became dissociated from the film as well.[3]Peter Bogdanovich had just completed What's Up, Doc? and was looking for another project when his ex-wife and frequent collaborator Polly Platt recommended filming Joe David Brown's script for the novel Addie Pray. Bogdanovich, a fan of period films, and having two young daughters of his own, found himself drawn to the story, and selected it as his next film.[4]

At the suggestion of Polly Platt, Bogdanovich approached eight-year-old Tatum O'Neal to audition for the role although she had no acting experience. Bogdanovich had recently worked with Tatum's father Ryan O'Neal on What's Up, Doc?, and decided to cast them as the leads.[4]

Various changes were made in adapting the book to film. Addie's age was reduced from twelve to nine to accommodate young Tatum, several events from the book were combined for pacing issues, and the last third of the novel, when Moses and Addie graduate to the big leagues as con artists after going into partnership with a fake millionaire, was dropped. The location was also changed from the rural south of the novel – primarily Alabama – to midwestern Kansas and Missouri.[4]

The car Moses is driving when he agrees to take Addie home is a 1930 Ford Model A convertible; the car Moses buys to impress Miss Trixie is a 1936 Ford V8 De Luxe convertible.[5] The whiskey being sold by the bootlegger shown toward the end of the film is Three Feathers blended whiskey, a label introduced by Oldtyme Distilling Corp. in 1882 and still produced up to the 1980s.[6]
The fruit-flavored soda drunk by Addie is from Nehi Soda, by a company founded as Chero-Cola in 1910, in 1925 renamed Nehi Corporation, which became Royal Crown Company, then Dr Pepper/Seven Up, then Dr Pepper Snapple Group.

Peter Bogdanovich also decided to change the name of the film from Addie Pray. While selecting music for the film, he heard the song It's Only a Paper Moon (by Billy Rose, Yip Harburg, and Harold Arlen). Seeking advice from his close friend and mentor Orson Welles, Bogdanovich listed Paper Moon as a possible alternative. Welles responded – "That title is so good, you shouldn't even make the picture, you should just release the title!"[4] Bogdanovich added the scene in which Addie has her picture taken in a paper moon solely so the studio would allow him to use the title.[7]

It currently holds a 92% approval rating from critics, based on 36 reviews, at Rotten Tomatoes; it's consensus reads, "Expertly balancing tones, Paper Moon is a deft blend of film nostalgia and finely tuned performances – especially from Tatum O'Neal, who won an Oscar for her debut."

Vincent Canby of The New York Times praised "two first-class performances" from Ryan and Tatum O'Neal but found the film "oddly depressing" and unable to "make up its mind whether it wants to be an instant antique or a comment on one."[9]Roger Ebert gave the film his top four-star rating and commented that "a genre movie about a con man and a little girl is teamed up with the real poverty and desperation of Kansas and Missouri, circa 1936. You wouldn’t think the two approaches would fit together, somehow, but, they do, and the movie comes off as more honest and affecting than if Bogdanovich had simply paid tribute to older styles."[10]Gene Siskel gave the film three-and-a-half stars out of four and wrote that Tatum O'Neal "is more than cute. Her role is something special in the well-established tradition of children on film."[11] Arthur D. Murphy in Variety called Tatum O'Neal "outstanding" and added, "Alvin Sargent's screenplay is a major contributor to the overall excellent results."[12]Charles Champlin of the Los Angeles Times wrote that Tatum O'Neal was "just plain marvelous and Paper Moon is a tough, funny, beautifully calculated diversion."[13] Gary Arnold of The Washington Post wrote that the film "may prove a keen disappointment if you go with high expectations. At its best the film is only mildly amusing, and I'm not sure I could come up with a few undeniable highlights if pressed on the point."[14]Tom Milne of The Monthly Film Bulletin called the film "very easy to take, especially as Alvin Sargent's dialogue has a nice edge of wit. The trouble is that the film covers all the ground it is going to cover in the scene in the restaurant near the beginning when we, with Ryan O'Neal, first realise that the sweetly awful child is going to be more than a match for him as far as wits are concerned."[15]

In September 1974, a television series called Paper Moon, based on the film, premiered on the ABC television network, with Jodie Foster cast as Addie and Christopher Connelly (who had appeared as O'Neal's brother in the earlier ABC series, Peyton Place) playing Moses. It was not a ratings success and the series was canceled in January 1975.